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Chapter 3 The Global Trade Environment: Regional Market Characteristics and Preferential Trade Agreements

Chapter 3 The Global Trade Environment: Regional Market Characteristics and Preferential Trade Agreements. PowerPoint by Kristopher Blanchard North Central University. GATT. General Agreement on Tariffs and Trade treaty among nations to promote trade among members Handled trade disputes

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Chapter 3 The Global Trade Environment: Regional Market Characteristics and Preferential Trade Agreements

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  1. Chapter 3 The Global Trade Environment: Regional Market Characteristics and Preferential Trade Agreements PowerPoint by Kristopher Blanchard North Central University

  2. GATT • General Agreement on Tariffs and Trade • treaty among nations to promote trade among members • Handled trade disputes • Lacked enforcement power • Replaced by World Trade Organization in 1995

  3. The World Trade Organization • Provides forum for trade-related negotiations among 141 members • based in Geneva • serves as dispute mediators • empowered with ability to enforce rulings • Countries found in violation of WTO rules are expected to change policies or else face sanctions

  4. Recent WTO Cases

  5. Preferential Trade Agreements • Many countries seek to lower barriers to trade within their regions • Free Trade Areas • Customs Unions • Common Market • Economic Unions

  6. North America • Canada, United States, Mexico • NAFTA established free trade area • all three nations pledge to promote economic growth through tariff reductions and expanded trade and investment • no common external tariffs • restrictions on labor and other movements remain

  7. NAFTA Income and Population

  8. Latin America • Caribbean, Central, and South America • 4 preferential trade agreements in place • Central American Integration System • Andean Community • Common Market of the South • Caribbean Community and Common Market

  9. Andean Community • Bolivia, Colombia, Ecuador, Peru, Venezuela • Customs union • Agreement abolished foreign exchange, financial and fiscal incentives, and export subsidies • Common external tariffs were established

  10. Common Market of the South(Mercosur) • Argentina, Brazil, Paraguay, Uruguay • Customs union, seeks to become common market • internal tariffs eliminated • common external tariffs up to 20% established • in time, factors of production will move freely through member countries • Chile and Bolivia - • associate members • participation in free trade area but not customs union

  11. Caribbean Community and Common Market (CARICOM) • Antigua, Barbuda, Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Haiti, Jamaica, Montserrat, St. Kitts, St. Lucia, St. Vincent, the Grenadines, Trinidad, Tobago • Replaced Caribbean Free Trade Association • Agreed to establish economic union with common currency in 1998

  12. Asia-Pacific • Includes 23 countries and 56% of world population • Japan • Newly industrializing economies • Association of Southeast Asian Nations

  13. Japan • Generates 14% of world’s GNP • Key factors • population density • geographic isolation • Recent economic struggles despite status as high income country • Strong culture requires flexibility and commitment from global marketers

  14. Newly Industrializing Economies (NIEs) • Strong economic growth in recent decades • foreign investment • export-driven industrial development • Sometimes called the 4 Tigers of Asia • South Korea • Taiwan • Singapore • Hong Kong

  15. Association of Southeast Asian Nations (ASEAN) • Brunei, Indonesia, Malaysia, Philippines, Singapore, Thailand, Vietnam, Cambodia, Laos, Burma • Goal to implement a free trade area by 2003 • Tariffs of 20+% will be reduced to 0 - 5% • Singapore represents great success among ASEAN nations

  16. Europe • European Union • European Free Trade Area • European Economic Area • The Lome Convention • Central European Free Trade Association (CEFTA)

  17. European Union • Initially began with the 1958 Treaty of Rome • Objective to harmonize national laws and regulations so that goods, services, people and money could flow freely across national boundaries • 1991 Maastricht Treaty set stage for transition to an economic union with a central bank and single currency (the Euro)

  18. European Free Trade Area and the European Economic Area • Austria, Finland, Sweden, Norway, Iceland, Liechtenstein, Switzerland • Free trade area • Members (excluding Switzerland) chose to establish European Economic Area (EEA) • Non-EU members of the EEA are expected to adopt EU guidelines • Norway, Iceland, Liechtenstein, and Switzerland maintain free trade agreements with other countries as well

  19. The Lome Convention • An accord between EU and 71 countries in Africa, Caribbean, and the Pacific • Promotes trade and provides poor countries with financial assistance from a European Development Fund • Currently working to establish a successor agreement

  20. Central European Free Trade Association (CEFTA) • Hungary, Poland, Czechoslovakia • Allows for cooperation in many areas including: • infrastructure and telecommunications • sub-regional projects • inter-enterprise cooperation • tourism and retail trade

  21. The Middle East • Afghanistan, Cyprus, Bahrain, Egypt, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, Syria, the United Arab Emirates, Yemen • Primarily Arab, some Persian and Jews • 95% Muslim • 3 key regional organizations • Gulf Cooperation Council • Arab Maghreb Union • Arab Cooperation Council

  22. Africa • 53 nations over three distinct areas • Republic of South Africa • North Africa • Black Africa • Regional agreements • Economic Community of West African States • East African Cooperation • South African Development Community

  23. Economic Community of West African States (ECOWAS) • Benin, Burkina Faso, Cape Verde, The Gambia, Ghana, Guinea, Guinea-Bissau, Ivory Coast, Liberia, Mali, Mauritania, Niger, Nigeria, Senegal, Sierra Leone, Togo • Free trade area with unified monetary zone

  24. East African Cooperation • Kenya, Uganda, Tanzania • Free trade area with possibility of expansion to a customs union

  25. South African Development Community (SADC) • Angola, Botswana, Congo, Lesotho, Malawi, Mauritius, Mozambique, Namibia, South Africa, Seychelles, Swaziland, Tanzania, Zambia, Zimbabwe • Mechanism to promote trade, cooperation, and economic integration by black-ruled states • Ultimately seeks to form customs union

  26. Looking Ahead to Chapter 4 Social and Cultural Environments

  27. Free Trade Areas • Two or more countries agree to abolish all internal barriers to trade amongst themselves • Countries continue independent trade policies with countries outside agreement

  28. Free Trade Areas Return

  29. Customs Unions • Evolution of Free Trade Area • Includes the elimination of internal barriers to trade (as in FTA) AND • Establishes common external barriers to trade Return

  30. Common Market • Includes the elimination of internal barriers to trade (as in free trade area) AND • Establishes common external barriers to trade (as in customs union) AND • Allows for the free movement of factors of production, such as labor, capital, and information Return

  31. Economic Unions • Includes the elimination of internal barriers to trade (as in free trade area) AND • Establishes common external barriers to trade (as in customs union) AND • Allows for the free movement of factors of production, such as labor, capital, and information (as in common market) AND • Coordinates and harmonizes economic and social policy within the union

  32. Economic Unions • Full evolution of economic union • creation of unified central bank • use of single currency • common policies on issues ranging from agriculture to taxation • requires extensive political unity Return

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